Financial Market Report for February 7, 2011
1) … Stocks rose while Oil, Natural Gas, Emerging Market Bonds, World Government Bonds And International Corporate Bonds fell lower.
Stocks, led by the Too Big To Fail Banks, RWW, +1.8%, took US Stocks, VTI, +0.7%, World Stocks, VT, +0.3%, and World Small Cap Stocks, VSS, higher +0.3% to new highs, as Oil, USO, -1.8%, UCO, -3.5%, BNO, -0.4%, and DBC, -0.3%, Natural Gas, GAZ, -5.0%, and UNG, -4.5%, Emerging Market Bonds, EMB, -0.3.%, World Government Bonds, BWX, -0.37%, and International Corporate Bonds, PICB, -0.19% , fell lower today, February 7, 2011.
Oil, USO, -1.8% and UCO, -3.5% fell lower as Ben Sharples of Bloomberg reports Oil Trades Near One-Week Low on Forecast U.S. Stockpiles Gained. Oil traded near the lowest in more than a week as tensions in Egypt eased and rising stockpiles in the U.S. signaled fuel demand may be faltering in the world’s biggest crude consumer. Investors should consider selling bullish oil positions as the Egyptian crisis subsides, according to JPMorgan Chase & Co. Futures slid 1.7 percent yesterday amid government talks with the opposition. U.S. crude inventories probably rose for a fourth week, a Bloomberg News survey showed before an Energy Department report. Supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil, $WTIC, are at the highest since at least 2004. “The reason for the moderation, especially with WTI, is the continued high stocks at Cushing, coupled with the fact that some of the geopolitical unrest in Egypt seems to be abating,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Gasoline inventories probably climbed to the highest level in almost 21 years, according to the survey. Supplies of the motor fuel increased 3 million barrels, or 1.3 percent, from 236.2 million a week earlier, according to the median of 10 analyst estimates. The projected advance would leave stockpiles at the highest since March 1990. (Hat Tip to Gary of Between The Hedges)
Natural Gas, UNG, -4.6% and GAZ, -5.0, fell lower as Jim Polson of Bloomberg reports Chesapeake Energy Plans to Sell Assets for $5 Billion. Chesapeake Energy Corp, CHK, the most active U.S. natural-gas driller, intends to raise $5 billion this year by selling its Fayetteville shale holdings and its stakes in two companies. It will use the money to cut debt. The sale will include 487,000 net acres in the Arkansas shale field that produce the equivalent of 415 million cubic feet of gas daily, Oklahoma City-based Chesapeake said in a statement today. The company also will sell its stakes in closely held service company Frac Tech Holdings LLC and Chaparral Energy Inc.
Sectors rallying strongly included the following; the pattern seen in each of these sectors suggests that a market top is being achieved.
Too Big To Fail Banks, RWW, 1.8% ….. BAC, C, WFC
Solar Energy, TAN, 1.7 ….. SPWRA
Small Cap Pure Value, RZV, 1.7 ….. These are making an Elliott Wave 2 Crest Up today, while the Small Cap Pure Growth, RZG, made an Elliott Wave 5 High today.
Dow Energy Service, IEZ, 1.6 ….. HAL, FTK, NOV
Small Cap Energy, XLES, 1.6 ….. PETD
Banks, KBE, 1.4 …. HBAN
Small Cap Industrial, XLIS, 1.2 ….. NPO, WTS
Industrial Metal Mining, CRBI, 1.2 …. BHP, AA, CLF, ZINC, DNN
Insurance, KIE, 1.2 ….. AEL
Small Cap Revenue, RWJ, 1.2 ..... WRLD
Real Estate, IYR, 1.0 ….. GRT, FR
Environment Services, EVX, 1.0 ….. CLH
Agriculture Industry, MOO, 1.0 … POT, DE
Small Cap Information, XLKS, 1.0 … OYOG
Wood and Paper, WOOD, 0.5 ….. KOP, BKI, KS
Networking, IGN, 0.4 ….. EMC, NTAP
Morgan Stanley Cyclical Index, $CYC, 1.0% ….. Components Deere, DE, 1.0%, and Dupont, DD, 1.5%, are helping bring in a new high in this cyclical index.
The Russell 2000, IWM, 1.0% ….. Sunrise Senior Living, SRZ, is making an Elliott Wave 5 High, while Decker Outdoor Advertising, DECK, is making an Elliott Wave 2 Crest Up and ready to enter an Elliott Wave 3 Down.
Energy XLE 0.6% and DIG, 1.4% ….. Exxon Mobil, XOM, and Chesapeake Energy, CHK, are making an Elliott Wave 5 high.
Truck manufacturer, Navistar, NAV, 1.4%, and construction equipment manufacturer Caterpillar, CAT, 1.0%, are making an Elliott Wave 5 High; while construction equipment manufacturer CNH Global, CNH, 1.3%, and industrial manufacturer, CMI, 1.9%, are cresting up into an Elliott Wave 2 and reading to enter an Elliott Wave 3 Down.
Restaurant equipment manufacturer, Middleby, MIDD, 2.3%, and rendering service company Darling, DAR, 2.0%, are making an Elliot Wave 5 High, while restaurant Chipotle Mexican Grill, CMG, 0.5%, is cresting up into an Elliott Wave 2, and ready to enter an Elliott Wave 3 Down.
Textile manufacturer, Unifi, UFI, 3.7% , is rising to an Elliott Wave 5 high.
DRAM Semiconductor manufacturer, Micron, MU, 2.1% is rising to an Elliott Wave 5 high.
Chemical manufacturer, DOW, 1.6%, is rising to an Elliott Wave 5 high.
Refineries, Holly Corp, HOC, and Western Refining, WNR, 2.8%, is rising to an Elliott Wave 5 high.
2) … Indications of a market top being made abound.
World Stocks relative to the Yen, VT:FXY, the World Stock Yen Carry Trade, rose to a rally high.
World Stocks relative to World Government Bonds, VT:BWX, the moneyness of stocks created by sovereign debt seigniorage, rose to a rally high.
The Yen, FXY, the international funding currency, has turned parabolically, and has entered an Elliott Wave 3 of 3 Down.
The Dow Theory in simplified terms holds that the Industrial shares and the Transportation shares make market turns together. The Industrial Stocks, IYJ, are making an Elliott Wave 5 High, while the Transportation Stocks, IYT, are cresting into an Elliott Wave 2 up, and ready to enter an Elliott Wave 3 Down. This communicates that the Industrial shares will soon be following the Transportation shares such as Genesee and Wyoming Railroad, GWR, and Ryder, R, lower.
Many stock sectors, such as the Russell 2000 are manifesting a megaphone or broadening top pattern in their weekly and daily charts; the Russell 2000 Weekly, IWM Weekly, is an example. Street Authority relates that when you see the broadening top, the market will eventually drop. The Russell 2000 has been making this chart pattern now for eight weeks. In as much as the 200% of the Russell 2000, URTY, is making a top into this pattern, today was an excellent time to go short.
A number of semiconductors appear to be topping out, USD, -0.1%, CY, -0.5%, ATML, -1.8%, NVDA, -4.2%, XSD, +0.1%, SWKS, 1.8%, CEVA, +1.8%, ENTG, +2.5%, … while others are cresting up into an an Elliott Wave 2, and ready to enter an Elliott Wave 3 Down, SNDK, -0.5%. GSIT, +1.6%, TQNT, +3.1%.
Retail, XRT, 0.6%, are cresting up into an Elliott Wave 2 High preparing to enter an Elliott Wave 3 Down.
Major currencies relative to the emerging market currencies, DBV:CEW, may be making an Elliott Wave 2 Crest High, and may be at the point of entering an Elliott Wave 3 Down.
Moneyness continues strong in leveraged buyouts, PSP, 0.6%, Junk Bonds, JNK, 0.2%, and distressed investments, FAGIX, 0.4%.
Airlines, FAA, although trading higher today, have sold off, and Utilities, XLU, have entered an Elliott Wave 3 of 3 Down.
China, YAO, and the The BRICS, EEB, have both entered an Elliott Wave 3 of 3 Down. Corey
Rosenbloom in article Sector Performance from August Low to Present February writes: “It’s been a while since I updated you on Sector ETF performance according to the Sector Rotation Model, so let’s take a quick look at past and present money flow returns from the Offensive and Defensive Sectors starting with the August 2010 low at 1,040 and moving to the present February breakthrough beyond 1,300. You can also call this the QE2 Returns/performance, as initial rumors of the Federal Reserve’s aggressive, market-lifting stimulative QE2 program began about this time. This is exactly the picture the Sector Rotation Model argues for Sector Strength and bull market continuation parameters, though the fact that Oil Energy is by far the largest performer sends caution signals to the market. High Oil Energy Prices are common place and expected in a rising/recovering economy bull market, but if they rise too high too quickly, it can serve as a broad-based tax that reduces income across the board for companies and individuals alike.” I take the report to mean that sector rotation is complete. And I embrace the statement “the fact that Oil Energy is by far the largest performer sends caution signals to the market.” This to me means if the Energy, XLE, and XLES, and Energy Service, OIH, and IEZ turn down that there will likely NOT be any sector sufficient enough to pick up the slack and sustain the market. I take the above oil report to mean that there is a “glut of oil” on the market and the price of it will be coming down. This means in turn that the energy and energy service shares will be coming down.
The evidence is clear, cogent and convincing that a market down turn is at hand.
In today’s news
Tyler Durden of Zero Hedge reports Stockholm Syndrome In The Nile: 70% of Egypt's Employed Work for the Government.
Stocks: FXY, RWW, UTI, VT, VSS, USO, UCO, NOA, DBC, GAZ, UNG, EMB, BWX, PICB, CHK, BAC, C, WFC, TAN, SPWR, RZV, RZG, IEZ, HAL, NOV, PDCE, HBAN, NPO, WTS, BHP, AA, CLF, ZINCQ, DNN, AEL, WRLD, WPG, FR, CLH, POT, DE, GEOS, KOP, BKI, KS, DVMT, NTAP, IWM, HCN, DECK, XLE, DIG, XOM, NAV, CAT, CNA, CMI, MIDD, CMG, DAR, UFI, MU, DOW